Here are the rules of the game: Lets say you start with $50. Everybody starts with $50. If at the end of the game you have $50, you live a normal life. If you have less than $25, you spend your life broke. If you have $75 or more, you get to be rich. There is only one round. You’re standing around with a few other investors, looking at a Company, you don’t own any shares right now. There is 1 share available, you get to choose if you want to buy or not, and how much you would offer to buy it for. You don’t know if your bid is successful until the game is over. After you decide whether or not to bid and how much to bid, the game is over and you are told what the Company was worth. This is all the information you have. Do you want to bid? How much?
if several people bid the maximum then who gets it?
You don’t know, it depends on how the players bid. If everyone bids the maximum, everyone shares for the maximum bid. If nobody bids and you bid 1, you get it all for nothing.
Lets go, $57
Let’s go, $88.
US mark to market rules apply? I believe 1 share would meet the definition “thinly traded”, so I’d pay out the wazoo for the shares, and mark it to whatever I please.
sujian Wrote: ------------------------------------------------------- > You don’t know if your > bid is successful until the game is over. So when will the game be over?
This thread should be re-titled “Let’s do my stats class homework for me”…not falling for it.
sujian Wrote: ------------------------------------------------------- > You don’t know, it depends on how the players bid. > If everyone bids the maximum, everyone shares for > the maximum bid. If nobody bids and you bid 1, you > get it all for nothing. still not very clear - you said there was only one share of the company. suppose there are only 2 players and they both bid the same amount, say $40. then do they each get 1/2 share, or what?
can we go short?
I’ll leverage my $50 40-1. I’ll then pay $2k for the company and start the IPO process (if fabricated financial documents are needed, no problem). I’ll then sell off the company to the public, pocket the proceeds and go hang out in the cayman islands for the rest of my life.
$1 Bob.
is this a risk aversion question. b/c bidding zero is the only way you can be certain to achieve a non-negative expected value based on this information. the share could be in worldcom. without information on the share, there is no point bidding. it’d be a completely blind gamble. you can’t share a share. what are you gonna have a stock split for this specifically?
This sounds like a game theory type question. So anyways lets say you bid $1 and win. You will only end rich if the stock was worth at least $26. As such if there is a possibility at all ending up rich in this game the stock should be worth at least $26 dollars. As such I would bid $26 for this stock. At the worst I would break even and if its over $51 I would end up rich with at least $75.
Uhm…at the very worst the stock is worth $0. You ended up paying $26 for it and now only have $24 left…thus living the rest of your life in a garbage container. I would bid $24, if the stock is worthless I end up with $26 and I can work on gaining back my wealth, if its worth $49 I get rich. Key in investing is to always place yourself in a position so you can survive to fight another day.
macrie69 Wrote: ------------------------------------------------------- > This sounds like a game theory type question.
MattLikesAnalysis Wrote: ------------------------------------------------------- > is this a risk aversion question. b/c bidding zero > is the only way you can be certain to achieve a > non-negative expected value based on this > information. the share could be in worldcom. > without information on the share, there is no > point bidding. it’d be a completely blind gamble. > > you can’t share a share. what are you gonna have a > stock split for this specifically? John Kelly would be proud.
this is a game theory question. I remember doing a similar problem in Uni, but … that was too long ago, and i forget what the outcome is. I think it was something about, 1. first predicting what everybody would do if they didn’t consider waht the others would do. 2. THen you take into account what they would do. 3. take into account what they would do, if they knew what you would do if thought about their actions 4. repeat If i remember correctly, it approaches a particular limit.
This is a lame post. Its quite obvious this is some sort of experiment. Here is my equally lame rebuttal to your proposal: Dear Sir Grundlemuff, I refuse to bid unless you provide me with a set of audited financial statements (at least 5 years worth of data) along with appropriate disclosures in conformance with US GAAP accounting standards. Also, I would like to examine all relevant proxy material, names and bio’s of corporate directors. Upon examining these documents I will submit my final offer for your consideration. If these materials cannot be furnished I will abstain from the bidding process and subsequently purchase just 1 share in a real company, which in 5 years will make me obscenely rich in many third world nations. Sincerely, Sir Mattholomeus Q. Poindexter Esq., CFA, MBA, CPA, CAIA, CFP III
xck2000 Wrote: ------------------------------------------------------- > this is a game theory question. I remember doing > a similar problem in Uni, but … that was too > long ago, and i forget what the outcome is. > > I think it was something about, > 1. first predicting what everybody would do if > they didn’t consider waht the others would do. > 2. THen you take into account what they would do. > 3. take into account what they would do, if they > knew what you would do if thought about their > actions > 4. repeat > this solution strategy looks like an infinite loop unless you break it with the realistic assumption that some of the participants are too retarded to carry a similar line of reasoning